Jan 13, 2016
CRE Prices Continued Upward Climb in November
Robust Space Absorption and Capital Flows Bolster Property Price Rise
Robust Space Absorption and Capital Flows Bolster Property Price Rise
CCRSI RELEASE – JANUARY 2016
(With data through November 2015)
This month's CoStar Commercial Repeat Sale Indices (CCRSI) provides the market's first look at November 2015 commercial real estate pricing. Based on 1,290 repeat sales in November 2015 and more than 150,000 repeat sales since 1996, the CCRSI offers the broadest measure of commercial real estate repeat sales activity.
U.S. Distress Sale Pairs Percentage, Data Through November 2015
CCRSI National Results Highlights
- STRONG FUNDAMENTALS AND CAPITAL FLOWS SUPPORTED BROAD CRE PRICE GROWTH IN NOVEMBER. U.S. commercial real estate continued to post broad price gains in November 2015, with market fundamentals reflecting healthy levels of absorption and continued rental gains, even as construction levels slowly increased. The two broadest measures of aggregate pricing for commercial properties within the CCRSI — the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index — each increased by 0.9% in November 2015, contributing to annual gains of 12.2% and 11.7%, respectively, for the 12 months ended November 2015.
- TRANSACTION VOLUME MAINTAINED RECORD PACE. Global capital flows remained robust given the relative attractiveness of U.S. assets. Composite sales-pair volume of $110.2 billion from the start of 2015 through November 2015 was 25% higher than in the same period in 2014, strongly suggesting that 2015 will handily eclipse last year’s record sales volume for the CCRSI.
- VALUE-WEIGHTED INDEX REACHES 18.4% ABOVE PRIOR PEAK. Along with record transaction volume, pricing for commercial property reached new highs as well, especially for high-quality assets in core markets. In November 2015, the value-weighted U.S. Composite Index soared 18.4% above its 2007 prior peak. The equal-weighted U.S. Composite Index, which reflects pricing for smaller properties in second-tier locations, also posted solid growth but remained 4% below its prior peak due to the delayed start to its recovery in comparison with the value-weighted version of the Composite Index. Similarly, within CCRSI’s equal-weighted U.S. Composite Index, the Investment-Grade segment, which captures the performance of high-quality properties, moved to within 1% of its prior peak, while the General Commercial Index remains 4.6% off its previous high water mark.
- FULL-YEAR ABSORPTION OF CRE SPACE REACHED CYCLICAL HIGH IN 2015. Net absorption across the three major commercial property types — office, retail, and industrial — totaled 649.2 million square feet for the full year of 2015, a 15.5% increase from 2014, and marked the highest calendar year annual total since 2007.
- INVESTMENT-GRADE SEGMENT RESPONSIBLE FOR LION’S SHARE OF ABSORPTION GROWTH IN 2015. Net absorption in the investment-grade segment in 2015 increased 23% from 2014, while net absorption in the general commercial segment remained flat in 2015. The investment-grade segment in the office and industrial sectors turned in particularly strong performances, averaging net absorption of 0.5% and 0.4% of total inventory, respectively, in 2015. The retail sector, even with muted inventory additions, averaged a more modest 0.2% net absorption of total inventory in 2015.
About the CoStar Commercial Repeat-Sale Indices
The CoStar Commercial Repeat-Sale Indices (CCRSI) is the most comprehensive and accurate measure of commercial real estate prices in the United States. In addition to the national Composite Index (presented in both equal-weighted and value-weighted versions), national Investment-Grade Index and national General Commercial Index, which we report monthly, we report quarterly on 30 sub-indices in the CoStar index family. The sub-indices include breakdowns by property sector (office, industrial, retail, multifamily, hospitality, and land), by region of the country (Northeast, South, Midwest, West), by transaction size and quality (general commercial, investment-grade), and by market size (composite index of the prime market areas in the country).
The CoStar indices are constructed using a repeat sales methodology, widely considered the most accurate measure of price changes for real estate. This methodology measures the movement in the prices of commercial properties by collecting data on actual transaction prices. When a property is sold more than one time, a sales pair is created. The prices from the first and second sales are then used to calculate price movement for the property. The aggregated price changes from all of the sales pairs are used to create a price index.
Becky Carr, Chief Marketing Officer, CoStar Group (firstname.lastname@example.org).
For more information about the CCRSI Indices, including the full accompanying data set, research methodology, legal notices and disclaimer, please visit http://www.costargroup.com/costar-news/ccrsi.
About CoStar Group, Inc.
CoStar Group, Inc. (NASDAQ:CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. LoopNet is the most heavily trafficked commercial real estate marketplace online with more than 10.0 million registered members. Apartments.com, ApartmentFinder.com and ApartmentHomeLiving.com currently form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Through an exclusive partnership with Move, a subsidiary of News Corp (NWS) (NWSA) (NWS) (ASX:NWSLV), Apartments.com is the exclusive provider of apartment community listings across Move’s family of websites, which include realtor.com®, doorsteps.com and move.com. CoStar Group operates websites with over 23.7 million unique monthly visitors in aggregate as of September 2015. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe and Toronto with a staff of approximately 2,850 worldwide, including the industry's largest professional research organization. For more information, visit www.costargroup.com.
This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations, beliefs, intentions or strategies regarding the future. These statements are based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that the trends represented or implied by the indices will not continue or produce the results suggested by such trends, and the possibility that the volume of property sales does not continue at the current pace or result in 2015 handily eclipsing 2014’s record sales volume for the CCRSI as expected. More information about potential factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, those stated in CoStar's filings from time to time with the Securities and Exchange Commission, including in CoStar's Annual Report on Form 10-K for the year ended December 31, 2014, and Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, each of which is filed with the SEC, including in the "Risk Factors" section of those filings, as well as the company's other filings with the SEC available at the SEC's website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update such statements, whether as a result of new information, future events or otherwise.